Important points
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Broadcom believes its AI chip business will generate $100 billion in revenue by the end of 2027.
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That would be a big milestone, but Broadcom stock hasn’t yet priced in this huge potential.
broadcom(NASDAQ:AVGO) It’s probably the least well-known trillion-dollar company. It only recently came onto the scene, but I think it has the potential to go much higher. The company is currently the world’s eighth-largest company by market capitalization, but after its CEO talks about its growth trajectory, it could be in the top five before you know it.
So what did Broadcom’s CEO have to say about demand? Let’s take a look.
Will AI create the world’s first millionaire? Our team published a report on one little-known company called an “essential monopoly” that provides critical technology needed by both Nvidia and Intel. Continued “
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Broadcom’s AI chip business is expanding explosively
Broadcom does a lot of things as a company. The company has developed its virtual desktop business through acquisitions in VMware, mainframe hardware and software, cybersecurity, and many other business units. But that’s not the focus of investors. Instead, everyone is focused on the company’s AI semiconductor business, and for good reason.
The company has two main AI semiconductor products: custom AI chips and connectivity switches. Connectivity switches are essential to data center operations, but the biggest winners investors are watching are chip businesses. This segment faces off against Nvidiait’s not an easy task. But it’s winning.
Broadcom designs application-specific integrated circuits (ASICs) instead of providing superior GPUs in many computing applications. These chips are specifically designed to handle a single workload. ASICs are not new, but their use in AI is. Broadcom has partnered directly with AI hyperscalers to design chips that fit their needs. This reduces costs for end users because they don’t pay for features they don’t use on the GPU.
GPUs aren’t going away forever because their flexibility is needed in many applications. Still, Broadcom’s custom AI chips could start taking market share from Nvidia as they prove their worth. In Broadcom’s fiscal 2026 first quarter (ending February 1) earnings call, CEO Hock Tan said, “We are now, in fact, on track to exceed $100 billion in AI revenue from chips alone in 2027. We also have the necessary supply chain in place to achieve this.”
This is a very large number because it excludes the connectivity switch business and all other business units. Additionally, Broadcom collectively generated $68 billion in revenue over the past 12 months. So by the end of next year, Broadcom’s AI chip business will be much larger than the entire company today.
As an investor, I could hardly believe that prediction. However, this prediction is reasonable given trends in AI spending. I think this makes Broadcom stock a buy right now, since the market hasn’t yet priced in this huge increase in Broadcom’s stock price.
Should you buy Broadcom stock now?
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Keithen Drury has held positions at Broadcom and Nvidia. The Motley Fool has a position in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
